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Exam 4: Accounting for Merchandising Operations

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Question 31

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A company has net sales of $1,500,000,sales commissions in the amount of $194,000,net income of $366,400,and the gross profit ratio of 60%.What amount is listed as gross profit on the income statement for the period?

A) $ 563,760
B) $ 600,000
C) $ 783,600
D) $ 900,000
E) $1,119,840

F) B) and E)
G) C) and D)

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Question 32

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Under the perpetual inventory system,the cost of merchandise purchased is recorded in the Purchases account.

A) True
B) False

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Question 33

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Sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collection efforts.

A perpetual inventory system is able to directly measure and monitor inventory shrinkage.

Following is the year-end adjusted trial balance for Yakima's Sporting Goods for the current year: $\begin{array}{c}\text { YAKDMA'S SPORTING GOODS}\\\text { Adjusted Trial Balance}\\\text { December 31}\\\begin{array}{|l|r|r|}\hline& \mathrm{Dr} & \mathrm{Cr} \\ \hline \text { Cash } & \$ 67,400 & \\\hline \text { Accounts receivable } & 46,000 & \\\hline \text { Merchandise inventory } & 50,000 & \\\hline \text { Office sunnlies } & 800 &\\\hline \text { Accounts payable } & & 16,000 \\\hline \text { Salaries payable } & & 850 \\\hline \text { Common stock } & & 50,000 \\\hline \text { Retained earnings } & & 75,530 \\\hline \text { Dividends } & 5,000 & \\\hline \text { Sales } & & 500,000 \\\hline \text { Sales returns and allowances } & 4,500 & \\\hline \text { Sales discounts } & 4,250 & \\\hline \text { Cost of goods sold } & 382,450 & \\\hline \text { Sales salaries expense } & 44,000 & \\\hline \text { Advertising expense } & 8,150 & \\\hline \text { Office salaries expense } & 24,325 & \\\hline \text { Office supplies expense } & 450 & \\\hline \text { Interest expense } & \underline{5,055} & \\\hline \text { Totals } & \$ 642,380 & \$ 642,380 \\\hline \end{array}\end{array}$ Prepare the closing entries at December 31 for the current year.

Which of the following accounts would be closed with a debit?

A _____________________ income statement format shows detailed computations of net sales and other costs and expenses and reports subtotals for various classes of items.

When a credit customer returns merchandise,a seller that uses the perpetual system would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.

The gross margin ratio equals net sales less ___________ divided by net sales.

A company's quick assets are $147,000 and its current liabilities are $143,000.This company's acid-test ratio is 1.03 (rounded to two decimals).

A debit memorandum is:

Match the following definitions with the appropriate terms

A seller usually prepares a ____________________ to confirm a buyer's return or allowance that informs the buyer of the seller's credit to the buyer's account receivable on the seller's books.

Accounting and reporting for merchandise purchases and sales are treated identically under both GAAP and IFRS.

On October 1,Robertson Company sold merchandise in the amount of $5,800 to Alberts,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Robertson uses the perpetual inventory system.The journal entry or entries that Robertson will make on October 1 is:

The acid-test ratio is also called the quick ratio.

A company's net sales were $676,600,its cost of goods sold was $236,810,and its net income was $33,750.Its gross margin ratio equals:

An account used in the periodic inventory system that is not used in the perpetual inventory system is:

Beginning inventory plus the net cost of purchases is the _____________________.

A company has the following accounts.What is the acid test ratio? $\begin{array}{lrlr}\text { Cash } & \$ 6,754 & \text { Dividends } & \$ 2,000 \\\text { Accounts receivable } & 13,733 & \text { Consulting fees earned } & 13,718 \\\text { Office supplies } & 2,625 & \text { Rent expense } & 3,673 \\\text { Land } & 37,153 & \text { Salaries expense } & 6,64 \\\text { Office equipment } & 14,535 & \text { Telephone expense } & 560 \\\text { Accounts payable } & 6,463 & \text { Miscellaneous expense } & 280 \\\text { Common stock } & 54,490 & \text { Retained earnings } & 13,847\end{array}$